Dollar Falls Versus Euro as U.S. Jobs Trail Forecast; Yen Drops

By Joseph Ciolli -
Apr 5, 2013

The dollar declined to the lowest
level in more than a week against the euro after U.S. employers
added fewer jobs in March than forecast, fueling speculation
growth in the world’s biggest economy is slowing.

The greenback fell for a third day versus the shared
currency on bets the payrolls data will stiffen the Federal
Reserve’s determination to maintain bond purchases to spur
growth. The yen touched the weakest level since 2009 versus the
greenback a day after the Bank of Japan (8301) outstripped forecasts
and announced unprecedented economic stimulus measures.

“The payroll data is obviously weaker than expected,”
Marc Chandler, New York-based global head of currency strategy
at Brown Brothers Harriman & Co., said in a telephone interview.
“It reinforces the idea the Fed has the pedal to the metal with
its easing. We’ll probably see some more weak economic data.”

The dollar depreciated 0.4 percent to $1.2991 per euro at 5
p.m. in New York. The greenback fell as low as $1.3040, the
weakest level since March 25. It gained earlier to $1.2901,
approaching its 200-day moving average at $1.2894. Moving
averages, which indicate momentum, are seen by some traders as
potential turning points. The dollar weakened 1.3 percent versus
the euro over the past five days, its first weekly loss since
March 15 and its biggest since January.

The U.S. currency climbed 1.3 percent to 97.57 yen and
reached 97.83, its strongest level since June 2009. The
greenback gained 3.6 percent this week against the yen, snapping
a three-week losing streak that was the longest since September.
The Japanese currency sank 1.7 percent to 126.79 per euro and
reached 127.29, the weakest since Feb. 7.

Dollar Index

The Dollar Index declined 0.1 percent to 82.572 and reached
82.273, the lowest since March 25. The gauge touched 83.494
yesterday, the highest level since Aug. 2.

Futures traders increased their bets that the euro will
decline against the dollar, figures from the Commodity Futures
Trading Commission show. The difference in the number of wagers
by hedge funds and other large speculators on a decline in the
euro compared with those on a drop -- so-called net shorts --was
65,701 on April 2, the most since November. Net shorts were
49,095 a week earlier.

Canada’s dollar fell versus most of 31 major peers after
the nation unexpectedly had the biggest job loss last month
since 2009. Employment fell by 54,500 positions, versus a
Bloomberg survey forecast for an increase of 6,500.

The loonie, as the currency is nicknamed for the image of
the aquatic bird on the C$1 coin, was down 0.5 percent to
C$1.0176 per dollar after sliding earlier as much as 1.1
percent, its biggest intraday drop since June 28.

Asian Currencies

Asian currencies depreciated the most this week since
January as policy makers from the Philippines to Japan proposed
measures that tend to weaken their exchange rates. The
Bloomberg-JPMorgan Asia Dollar Index (DXY) declined 0.3 percent since
March 29, the most since the week ending Jan. 25.

South Korea’s won declined to a seven-month low against the
dollar as the risk of conflict with North Korea spurred capital
outflows. The currency slid 0.7 percent to 1,131.69 and touched
1,131.73, its weakest level since Sept. 6.

“Geopolitical risks have been significantly magnified this
week, triggering selloffs of South Korean assets as investors
were unsure how the situation would develop under the new leader
of the communist state,” said Han Sang Soo, a money manager in
Seoul at Samsung Asset Management Co., which oversees $114
billion.

Jobs Report

U.S. payrolls grew by 88,000 workers last month, the least
in nine months, after a revised 268,000 gain in February that
was higher than first estimated, Labor Department figures showed
in Washington. The median forecast in a Bloomberg survey of
economists was for a gain of 190,000.

The jobless rate fell to 7.6 percent, from 7.7 percent. The
latest figure, the lowest since December 2008, reflected a
496,000 decline in the size of the labor force.

“The payroll report was absolutely dreadful -- the fact
that this is not just below expectations, but also below
100,000, is eyebrow-raising,” Ravi Bharadwaj, a senior market
analyst in Washington at Western Union Business Solutions, a
unit of Western Union Co. (WU), said in a telephone interview.
“Weaker-than-expected reports that break the trend add to the
likelihood of the Fed holding true to its easing promises.”

Fed Chairman Ben S. Bernanke and his Federal Open Market
Committee colleagues are deploying record stimulus through an
open-ended expansion of the Fed balance sheet after determining
that the benefits from stoking a flagging economy outweigh any
risk of financial instability or higher inflation.

Quantitative Easing

The U.S. central bank is buying $85 billion of bonds a
month in the third round of its quantitative-easing strategy to
spur the economy, which may debase the dollar. While policy
makers reiterated after their March meeting the Fed will
maintain its purchases until there’s significant improvement in
the labor market, Bernanke told reporters the pace may be
altered if warranted by a healing economy.

The Fed’s next policy meeting is April 30-May 1.

The euro fell earlier today against the dollar after retail
sales in the 17-nation region fell 0.3 percent in February from
the previous month and slid 1.4 percent versus a year earlier,
the European Union’s statistics office said.

The greenback touched the strongest level against the
shared currency yesterday since Nov. 21, $1.2746, after European
Central Bank President Mario Draghi said euro area policy will
remain accommodative for as “long as needed.” The ECB kept its
benchmark interest rate unchanged at 0.75 percent.

Japanese Stimulus

The yen slid for a second day against the dollar after the
Bank of Japan said it will increase its bond purchases to 7.5
trillion yen ($77 billion) a month and double the monetary base,
which includes cash in circulation, in two years. Policy makers
under new Governor Haruhiko Kuroda are working to end 15 years
of deflation and two decades of economic stagnation.

“The BOJ announcement was a game changer in a lot of
senses,” Vassili Serebriakov, a foreign-exchange strategist at
BNP Paribas SA in New York, said in an interview on Bloomberg
Television’s “Street Smart” hosted by Trish Regan. “For the
first time we’re going to start seeing the BOJ really crowding
out domestic Japanese investors from the Japanese government-
bond market. Remember, this is how QE is supposed to work.”